Fear and Greed
The primary motivations of an investor are either fear or greed. Either of these emotions is a detriment to your investing because investments should be based on mathematics and logical reasoning. The investor should strive to be objective in everything they do.
Fear
Fear will get you to sell a security. When the market goes down, people will panic and sell their stock. They are afraid it may go down even further and lose the entire value. What produces fear are negative news stories and stock price fluctuations (and lost of other things). Remember that a well researched stock will have a margin of safety and stock price fluctuations will be easier to handle because you know the company can handle it. You should also consider not watching news about stocks. It is nerve wracking to hear bad news so you might as well just ignore it and enjoy life. Ignoring news will help you stick to your fundamental investment rules and mathematical calculations. Fear has driven many people away from investing and even more people from doing the right things. To keep fear at bay, make sure the fundamentals and mathematics are sound. It will bring peace to you.
Greed
Greed gets a lot of people. Bubbles are made from a greedy misinformed population. Greed is what motivates you to buy an obscure company without a good track record. When you think that you can outperform everyone else doing something obscure, it usually results in losses. To get good returns, you need to be greedy, but being overly greedy will cost you a lot of money. I have seen many investors without training and they try to beat the market doing all kinds of crazy weird things. They usually do well for a while because they get into a prosperous company, but undoubtedly they never know when to pull out and lose big.
Have you seen all the people in multi level marketing. Usually the pitch goes like this. Just get like six people in and buy this overpriced stuff and you will be a millionaire without doing any work. You can't feel to sorry for all the people who make nothing in multi level marketing. They are basically looking for a free lunch doesn't exist. Why do the people join up? The sales people are great at bringing out the greed. They show pictures of fancy cars, big houses, and boats that you can purchase after you get your six people in. They might tell you to put the pictures on your refrigerator to get you to look a them every day. The bottom line is that you can see that the greed has got a lot of people to do some pretty dumb things. To stay objective, make decisions based on sound logic and mathematics. Don't make decisions because someone talks to you for five minutes and tells you how rich you can be without doing any work. If you allow others to think for you, you are in violation of one of the most important investment rules. Do your due diligence yourself.
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